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Deposits and stage payments: paying a builder with less risk

How you pay matters as much as how much you pay. Paying in small steps, each tied to work you can see, keeps more of the money with you until the job is done. Paying in a way you can trace gives you more routes to getting money back if something goes wrong. Nothing here makes a payment risk-free.

Is there a legal limit on deposits?

No. There is no legal cap on the deposit a builder can ask for. The percentages below are guidance from consumer bodies and trade associations, not law.

The law touches deposits in several places. Three matter most:

  • What you are told first. If the contract is off-premises (for example, agreed with the builder at your home; see what counts), the builder must tell you "the existence and the conditions of deposits" before you are bound. This is in Schedule 2 to the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.
  • Unfair terms. Schedule 2 to the Consumer Rights Act 2015 lists "consumer contract terms which may be regarded as unfair". Two describe:
  • a term letting the trader keep money you paid if you decide not to go ahead, without equal compensation to you if the trader is the one who cancels
  • a term making you pay "a disproportionately high sum in compensation or for services which have not been supplied"

These are terms that may be unfair, not terms that always are. Take advice if a builder is keeping a deposit. - Getting money back. - If you cancel. If you cancel within a cancellation period, the trader must refund the payments you made (regulation 34 of the 2013 Regulations), subject to the rules on work already started (see regulation 36). Those rules are in your right to cancel building work. - If the work was never done. The Consumer Rights Act 2015 keeps open "seeking to recover money paid where the consideration for payment of the money has failed" (section 54(7)(b)). In plain terms, that means trying to get back money paid for something you didn't get.

When building work goes wrong explains the steps. Get advice first.

What the guidance says

  • Citizens Advice:
  • Don't pay everything upfront.
  • If a deposit is for materials, offer to buy the materials yourself, so that at least they are yours.
  • Where a deposit can't be avoided, keep it as low as you can: "don't agree to more than 25%".
  • HomeOwners Alliance (HOA): "A 10% deposit is reasonable but don't pay over 25%."
  • Federation of Master Builders (FMB): "Around 10% is often used as a guide, but the right amount will depend on the project." It suggests asking what the deposit covers, putting it in the contract, and getting a receipt.

Pay in stages tied to work you can check

Split the price into stages, and pay each one when you can see that stage is done. If a problem needs putting right, most of the money is then still with you. Citizens Advice and the FMB both advise paying in stages and checking each stage before you pay.

Tie each payment to something that has visibly happened, not to a date on the calendar. For example:

  • walls up to roof level
  • roof on and watertight
  • first fix done (pipes and cables in, before plastering)
  • completion

If a stage pays for materials, ask whether you or the builder will own them once they are paid for. Remember Citizens Advice's suggestion of buying materials yourself.

Put the schedule in the contract before work starts. Which? Trusted Traders' guide says: "You should agree a schedule for payments in advance of work starting." The Payment Schedule and Receipts Record is a form for the schedule and the payments made against it.

Retention, if you agree one

A retention is a small part of the price held back until an agreed time after the work is finished. It covers putting right snags (small defects).

  • FMB: "Retention is often around 2.5%–5%, but the amount and release point should be agreed clearly in the contract."
  • HOA: it suggests considering a 5% retention when you work up the contract.

A retention only works if it is agreed in the contract before work starts. It is not something to add at the end.

Pay by card if you can

Citizens Advice's order of preference is a debit or credit card, then a bank transfer if you can't pay by card. "Don't pay with cash."

Credit card: section 75.

  • What it does. Where it applies, section 75 of the Consumer Credit Act 1974 makes the card provider liable alongside the builder for a misrepresentation (being told something untrue that led you to agree) or a breach of contract.
  • The limits. Section 75(3)(b) sets them. It does not cover a claim about any single item with a cash price of £100 or less, or more than £30,000.
  • Ask first. Ask your card provider whether it applies to your payment.

Citizens Advice adds these points:

  • A deposit on a credit card can count. Citizens Advice's reading is that section 75 includes "paying a deposit by credit card, even if that's less than £100".
  • A part payment can support a claim for the full price. Citizens Advice's example is a £250 oven: a £50 deposit on a credit card, £200 in cash, and a claim for the full £250. The price limits still apply to the full price, not just the card payment.
  • The limits are about the price of the item or job. Citizens Advice says: "The limits are for a single item you want to get a refund for, not the whole order." A building job priced at more than £30,000 may be outside section 75, even if you paid only the deposit by card. Ask your card provider before you rely on it.
  • Pay the builder directly. Citizens Advice says you "can't usually use Section 75 if you didn't buy directly from the trader". If you pay through an app, a wallet or another company, ask your card provider first.
  • Interest. You will usually be charged interest if you don't pay the card off on time.

Debit card: chargeback. If you paid by debit card, Citizens Advice says you can ask your card provider for a "chargeback". Some providers call it "disputed transactions". The provider might say no.

Cash or bank transfer. Citizens Advice says: "If you paid by cash or bank transfer, you can't claim through the chargeback scheme or section 75." It adds that if you paid by bank transfer and were the victim of a scam, you might be able to get your money back. Contact your bank as soon as possible.

Avoid cash

Citizens Advice, the HOA and the FMB all advise against paying cash. Citizens Advice says a trader who will only take cash, or wants everything upfront, may be dishonest or unreliable.

Be careful if your builder's bank details change partway through. The FMB says to confirm any change "directly with your builder using contact details you already know before transferring money".

Get a receipt for every payment

Get a receipt for any deposit, and for materials a deposit pays for; Citizens Advice advises both. Keep invoices and receipts together. For each payment, write down:

  • the date
  • the amount
  • how you paid
  • which stage it was for

Insurance-backed guarantees and deposit protection

The law. For ordinary building work, we found no law that requires a builder to protect your deposit or to give an insurance-backed guarantee. Where these exist, they come from a scheme's rules or from a product the builder offers.

Government-funded energy schemes set their own guarantee rules. TrustMark says "Minimum 25-year guarantees are mandatory for certain Energy Efficiency Measures under ECO". ECO is a government energy efficiency scheme.

What an insurance-backed guarantee is. Citizens Advice describes it as a guarantee backed by an insurance policy, so it "can still be honoured if the trader goes out of business". It also suggests asking whether a builder has insurance that would repay your deposit if they went out of business.

Examples of scheme rules and products:

  • TrustMark. It says its registered businesses "are expected to provide a minimum two-year guarantee". It also describes insurance against the tradesperson ceasing to trade.
  • The FMB. It names an insurance-backed guarantee, the FMB Building Work Guarantee, for eligible structural defects. It says that where a warranty is an FMB warranty, you must send confirmation of any deposit within 28 days for it to be covered under the warranty terms.
  • Escrow. Citizens Advice says a trader might use an "escrow" scheme, where a separate company holds the deposit. It says to check the escrow company is registered with the Financial Conduct Authority (FCA).

If you are offered any of these, ask:

  • who the insurer or provider is
  • what exactly is covered, and for how long
  • what excess you would pay

Get the policy documents. A guarantee is in addition to your legal rights, not instead of them.

Trusted Payments

Trusted Payments is an app for paying for home improvement work in stages. The Chartered Trading Standards Institute (CTSI) works with it under a commercial partnership. Using it is voluntary: nothing in the law requires you or your builder to use it.

How it works.

  • You and your builder agree the job as a set of priced stages.
  • You pay for each stage as you reach it, and the builder is paid once you sign that stage off.
  • CTSI says Trusted Payments "holds the completion money as the consumers agent".

If you disagree. You and your builder have 45 days to settle it. After that, an independent Ombudsman decides, and CTSI says the decision binds both of you. Before you sign up, read the terms on what a binding decision means for going to court.

What CTSI's page lists.

  • An insurance-backed warranty for three months while the job runs and twenty-four months after.
  • Cover if the trader disappears, stops trading or walks off the job.
  • Full terms and exclusions are on the Trusted Payments website.

Worth knowing.

  • It isn't a bank. CTSI says it "is not a bank and is not authorised by the Financial Conduct Authority". Read that alongside Citizens Advice's advice on escrow companies above.
  • It costs money. There is a fee for each project, usually built into the builder's price. CTSI says it is "typically … between £25 and £85 depending on the project size".
  • It needs your builder to have signed up. It only works if they have. CTSI suggests asking whether they use it.
  • CTSI doesn't check the traders or promise an outcome. It "does not approve, vet or endorse the individual traders who use the app, and cannot guarantee the outcome of any project, warranty claim or Ombudsman decision".

If something goes wrong, don't just stop paying

It is tempting to hold money back when the work isn't right. Which? advises against it: "it could also put you in breach of your contract."

Instead:

  1. Record the problem. Take dated photos and notes.
  2. Follow what your contract says, then take the steps in order:
  3. a written complaint to the builder
  4. the builder's scheme or an alternative dispute resolution (ADR) scheme, if there is one
  5. a letter before claim
  6. court
  7. Get advice before you decide not to pay a stage. In England and Wales, ring the Citizens Advice consumer helpline on 0808 223 1133 (Welsh-speaking adviser: 0808 223 1144), or speak to a solicitor.

When building work goes wrong takes you through each step.

Scotland and Northern Ireland

This guide is written for England and Wales. Section 75 and the Consumer Rights Act 2015 apply across the UK.

  • Scotland: consumer advice comes from Advice Direct Scotland (0808 164 6000). Report fraud to Police Scotland on 101.
  • Northern Ireland: consumer advice comes from Consumerline (0300 123 6262). Report fraud to Report Fraud (0300 123 2040).

General information, not advice

This guide is general information about the law in England and Wales. It is not advice on your own situation. A payment record we sell records what was agreed and paid. It is not insurance, and it doesn't hold your money or get it back. What our documents can and cannot promise.

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